Natural gas shortages slam many European nations

By AP&nbsp|&nbsp

Posted: Tue 3:21 PM, Jan 06, 2009&nbsp|&nbsp

Updated: Tue 3:34 PM, Jan 06, 2009

VIENNA, Austria (AP) -- The Russia-Ukraine natural gas dispute hit Europe with the force of a winter storm Tuesday, cutting or limiting supplies to at least a dozen nations. Tens of thousands of people were left without heat and governments scrambled to find alternate energy sources.

Shocked by how fast the shortages were spreading, the European Union demanded a quick end to the quarrel - a sharp turnaround from their earlier stance, when officials had downplayed the conflict between Moscow and Kiev as primarily a business matter.

But by Tuesday evening, gauges on delivery pipelines to seven countries - including some depending totally on Russian gas - pointed toward zero and an increasing number of other nations reported significant reductions.

The Ukrainian gas company Naftogaz said Russia's gas giant Gazprom had sharply reduced its shipments to Europe through pipelines crossing Ukraine, triggering the cuts. Gazprom in turn accused Ukraine of shutting three of four transit pipelines.

Russian Prime Minister Vladimir Putin ordered Gazprom to continue a 15 percent cut in daily shipments through Ukraine. He said Ukraine was stealing gas from Western consumers "because they are the ones who bought these goods and paid for them."

Ukraine has acknowledged diverting some of the gas, but says it has the right to use it to run compressors at pumping stations along the pipeline network.

Some governments and utilities sought to reassure the public, saying well-stocked storage facilities would allow them to weather the storm.

Still, the growing fallout from the dispute evoked memories of the 2006 Gazprom-Ukraine gas war - and starkly reflected once again the continent's energy dependence on Moscow.

Balkan nations appeared to be the worst hit.

In Bulgaria, which depends totally on Russian gas, the eastern cities of Varna and Dobrich were left without any gas due to the cutoff. Authorities said 12,000 Varna households were without central heating amid freezing temperatures.

"I have to use electric radiators at home, which is almost twice more expensive as central heating," said Anton Stoyanov, a 45-year-old radio engineer in Varna. "But we have to keep the apartment warm since we have a baby in the family."

With pipeline operator Bulgargaz saying Bulgaria had gas reserves for only "a few days," President Georgi Parvanov urged authorities to restart a mothballed unit of its nuclear plant.

Serbia, which also relies on Russia for 90 percent of its gas, said all supplies ceased Tuesday afternoon. With little in storage, serious outages were possible within days.

Turkey, facing a complete gas cutoff from Russia, weighed alternate supply options, including an offer from Iran to increase supplies through an Iranian-Turkish pipeline.

With icy temperatures hitting central Europe, Germany, Europe's largest economy, also braced for emergency mode. E.On Ruhrgas, the nation's biggest gas importer, announced it expected all Russian natural gas shipments sent via a pipeline through Ukraine to stop.

"Our options will be pushed to their limits, if this drastic supply shortage continues and temperatures stay at very low levels," warned company chairman Berhard Reutersberg.

Germany imports close to 40 percent of its gas from Russia - 80 percent through Ukraine. But the Economic Ministry said Germany maintains 46 well-stocked underground storage facilities and experts estimated that reserves were enough to cover demand for 40 days.

With only 15 percent of its gas coming from Russia, France was less affected. Despite seeing a 70 percent drop in gas supplies Tuesday, it has storage facilities that can hold up to two months of reserves and access to extra gas from Algeria and Norway.

Britain was little affected - as was much of northern Europe. Paolo Scaroni, chief of the Italian energy company ENI, said high stockpiles and diversification meant Italy had little to worry about for several weeks.

But with Europe receiving a quarter of its natural gas from Russia - with close to 80 percent going through Ukraine - other governments urged consumers to cut back on gas use.

After days of blaming each other for the crisis, Russia and Ukraine agreed to hold new talks in Moscow on Thursday. The two feuding neighbors are locked in a dispute over pricing and overdue payments. Russia cut off natural gas supplies to Ukraine on Jan. 1 but had promised to keep gas moving to Europe.

The sudden drop in supplies evoked memories of January 2006, when a similar dispute left much of Europe with shortfalls of up to 50 percent. Now, as then, the dispute also underscored Europe's energy dependence on Russia.

Russia has a near pipeline monopoly to EU countries - even for non-Russian gas. Additionally, most European countries have failed to develop alternatives such as liquefied gas terminals that would allow them to circumvent Moscow's choke-hold by allowing sea shipments of the commodity.

And even if non-Russian pipelines were a reality, Iran - a tempting potential supplier with gas reserves second only to Russia - is effectively off limits due to the intense political pressure from Washington over Tehran's controversial nuclear program.

There are some differences between then and now, however.

The 2006 gas dispute caught Europe unprepared, with its gas storage facilities at near empty. Today, they are well stocked. The crisis today also comes amid an economic downturn, when there is less demand for energy.

"Many of the large factories in the EU, particularly in Germany are shut" or working at less than capacity, said London-based analyst John Hall.

Still, the stockpiles have the potential to ultimately deepen Europe's gas woes.

"The 2006 disruption caught Europe by surprise, which prompted EU officials to prod Russia and Ukraine to strike a quick deal," wrote analyst Andrew Neff of Global Insight. "This time, both Gazprom and Naftogaz appear to be digging in their heels for what could be a longer dispute."

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